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FRM Part II · FRM Exam Part II · Solvency, Liquidity and Other Regulation After the Global Financial Crisis

Which statement best describes domestic systemically important banks (D-SIBs) under the Basel framework?

D-SIBs are identified by national authorities using Basel Committee principles that focus on a bank's impact on the domestic financial system and economy, and they face higher loss absorbency requirements. They are not scored in the global G-SIB buckets or exempt from additional capital.

  1. ANational authorities assess D-SIBs using principles set by the Basel Committee, focusing on the bank's impact on the domestic economy, and apply a higher loss absorbency requirementCorrect
  2. BD-SIBs are identified by the FSB using the same five-category score as G-SIBs and assigned to global buckets
  3. CD-SIBs are banks below a fixed asset threshold and are exempt from additional capital
  4. DD-SIBs are only investment banks that issue TLAC-eligible debt abroad

Explanation

The Basel D-SIB framework sets principles for national authorities to identify banks whose failure would significantly disrupt the domestic financial system and economy, and to impose higher loss absorbency commensurate with that impact. G-SIB scoring is global and separate, and D-SIBs are not exempt from extra capital.

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